Banco Macro S.A.

Good morning, ladies and gentlemen, and thank you for waiting. At this time, we would like to welcome everyone to Banco Macro's 4Q19 earnings conference call. We would like to inform you that the 4Q19 press release is available to download at the Investor Relations website of Banco Macro, www.macro.com.ar slash relations hyphen inversors slash. Also, this event is being recorded and all participants will be in listen-only mode during the company's presentation. After the company's remarks are completed, there will be a question and answer session. At that time, further instructions will be given. Should any participant need assistance during the call, please press star zero to signal the operator. It is now my pleasure to introduce our speakers. Joining us from Argentina are Mr. Gustavos Manriquez, Gustavo Manriquez, Chief Executive Officer, Mr. Jorge Scorinci, Chief Financial Officer, and Mr. Nicolas Torres, IR. Now I will turn the conference over to Mr. Nicolas Torres. You may begin your conference, sir.

Good morning and welcome to Banco Macro's 4Q19 conference call. Any comment we may make today may include forwarded statements which are subject to various conditions. and these are outlined in our 20F, which was filed to the SEC, and it's available at our website. 4Q19 press release was released yesterday, and it's also available at our website. I will now briefly comment on the bank's 4Q19 financial results. Bank of Macro's net income for the quarter was 13.3 billion pesos, 1% higher than in 3Q19, and 150% percent higher than the 5.2 billion pesos posted a year ago, based on an increase in net interest income and in net fee income. The banks for Q19 accumulated ROE and ROA of 59 percent and 10.4 percent respectively, remained healthy, and showed the banks' earnings potential. On a fiscal year basis, Banco Macro earned 40.8 billion pesos in fiscal year 2019. 159% higher than the 15.7 billion pesos earned in fiscal year 2018. Net operating income before general and personal expenses for 4Q19 was 29.7 billion pesos, increasing 13% of 3.5 billion pesos water, and 83% higher than a year ago. Operating income after general administrative expenses and personal expenses was 16.4 billion pesos, 38% or 4.5 billion pesos higher than in 3Q19, and 117% or 8.9 billion pesos higher than in 4Q18. In fiscal year 2019, operating income totaled 48.1 billion pesos, 114% higher than in fiscal year 2018. In the quarter, net interest income totaled 22.7 billion pesos, 13% or 2.7 billion pesos higher than the result posted in 3Q19, and 85% or 10.4 billion pesos higher than the result posted one year ago. This performance can be traced to an 8% quarter-on-quarter decrease in interest income and a 35% decrease in interest expenses. In fiscal year 2019, Net interest income total $72.5 billion, 83% higher than the $39.6 billion registered in fiscal year 2018. In Q19, interest income total $32.8 billion, 8% or $2.8 billion lower than in Q19, and 38% or $9 billion higher than the previous year. Within interest income, interest on loans increased 38% or 6.1 billion pesos quarter-on-quarter and 42% year-on-year. In 2019, interest on loans represented 67% of total interest income. During fiscal year 2019, interest on loans totaled 67.5 billion pesos, increasing 42% compared to fiscal year 2018. Net income from government and private securities decreased 49% or 9.5 billion pesos quarter-on-quarter due to lower LELIX volume and lower interest rates. Compared to 4Q18, net income from government and private securities increased 25% or 2 billion pesos. In fiscal year 2019, net income from government and private securities totaled 53.8 billion pesos, 204% higher than in fiscal year 2018. In 4Q19, FX gains, including investment in the realty financing, total a 1.3 billion pesos gain. During fiscal year 2019, FX gains totaled 3.1 billion pesos compared to a 1.4 billion pesos loss posted in fiscal year 2018. In 4Q19, interest expenses totaled 10.1 billion pesos, 35% of 4.4 billion pesos decrease compared to 4Q19. and 12% or 1.4 billion pesos lower on a yearly basis. Within interest expenses, interest on deposits decreased 34% or 4.8 billion pesos quarter on quarter, mainly driven by an 18% decrease in the average volume of time deposits and a 21.4 percentage points decrease in the average time deposit interest rates. On a yearly basis, interest on deposits decreased 12% or 1.3 billion pesos. In 4Q19, interest on deposits represented 93% of the bank's financial expenses. In fiscal year 2019, interest expense totaled 51.6 billion pesos and was 99% higher than in fiscal year 2018. As of the fourth quarter of 2019, the bank's accumulated net interest margin, including FX, was 21.1%, higher than the 19.1% posted in 3Q19 and the 14.9 registered in fall Q18. In fall Q19, net fee income totaled 4.1 billion pesos, 10% higher than in Q19, and on a yearly basis, net fee income increased 32% or 1 billion pesos. In fiscal year 2019, net fee income totaled 14.6 billion pesos, increasing 31% compared to fiscal year 2018. In fall Q19, net income from financial assets and liabilities at fair value for profit and loss totaled 2.6 billion pesos, increasing 292% or 1.9 billion pesos compared to 3Q19. In fiscal year 2019, net income from financial assets and liabilities at fair value for profit and loss totaled 5.3 billion pesos gained, 402% higher than in fiscal year 2018. In the quarter, other operating income totaled $926 million, decreasing 9% compared to Q19, and on a yearly basis, other operating income increased 69% of $378 million. In fiscal year 2019, other operating income totaled $6.1 billion, 117% higher than in fiscal year 2018. In Q19, Bank of America's personal and administrative expenses totaled $8.3 billion, 13% higher, or $941 million than the previous quarter. On a yearly basis, personal and administrative expenses increased 58% of $3 billion. In fiscal year 2019, administrative expenses plus employee benefits increased 64% compared to fiscal year 2018. As of December 2019, the accumulated efficiency ratio reached 32.3%, improving from the 33.2 posted in 3Q19 and 37.9% registered a year ago. In fiscal year 2019, Banco Macro's effective tax rate was 16.3%, lower than the 30.7% registered during fiscal year 2018. During 2019, and in accordance with applicable income tax law and regulations and the evolution of consumer price index, the bank decided to adjust income tax by inflation. In terms of loan growth, the bank's financing to the private sector grew 10% or 18.7 billion pesos quarter-on-quarter and 22% or 38.6 billion pesos year-on-year. Within commercial loans, growth was driven by overdraft and others with a 32% and a 52% increase quarter-on-quarter respectively. On the consumer side, growth was driven by credit card loans which grew 27% or 9 billion pesos in the quarter. It is important to mention that Banco Marcos market share over private sector loans as of December 2019 reached 8.1%. On the funding side, total deposits increased 1% or 3.7 billion pesos quarter-on-quarter and increased 10% or 24.9 billion pesos year-on-year. Private sector deposits increased 3% quarter-on-quarter, while public sector deposits decreased 14% quarter-on-quarter. The increase in private sector deposits was led by demand deposits, which increased 17% or 18.5 billion pesos quarter on quarter, while time deposits decreased 11% or 13.2 billion pesos. Within private sector deposits, special deposits increased 2% or 4.3 billion pesos, while US dollar deposits decreased 6% or 84 million dollars. As of December 2019, Banco Macro's transactional accounts represented approximately 54% of total deposits. Banco Macro's market share of private deposits as of December 2019 totaled 6.2%. In terms of asset quality, Banco Macro's non-performing total financial ratio reached 2.07% and the coverage ratio reached 123.08%. In terms of capitalization, Banco Macro accounted for an excess capital of 69 billion pesos, which represented a total regulatory capital ratio of 27.3% and a Tier 1 ratio of 20%. The bank's aim is to make the best use of this excess capital. The bank's liquidity remained more than appropriate. Liquid assets to the deposit ratio reached 59%. Overall, we have accounted for another positive quarter. We continue to show it a solid financial position. Asset quality remains under control and closely monitored. We keep on working to improve more our efficiency standards, and we keep a well-atomized deposit base. At this time, we would like to take the questions you may have.

Thank you. At this time, we're going to open it up for question and answers. If you'd like to ask a question, please press star 1 on your touch-tone phone. If you're using a speakerphone, please pick up your handset before pressing the keys. To withdraw your question, please press star, then 2. Today's first question comes from Ernesto Gabriando of Bank of America. Please go ahead.